Thayer Consultancy Background Brief

ABN # 65 648 097 123

ExxonMobil Facing Divestment
Issues May Exit Vietnam
September 12, 2019

We have heard rumours that ExxonMobil has plans to withdraw from its oil
cooperation project with Vietnam. Could you please give us your assessment of the
following issues?
Q1. Has there been any attempt by the U.S. Government to influence ExxonMobil's
decision?
ANSWER: At the present moment there are only rumours about ExxonMobil, mainly
in Vietnamese social media and on Twitter. ExxonMobil. has not made any
announcement.
There are five possibilities: (1) the rumours are wrong, (2) China is putting pressure on
either or both Vietnam and ExxonMobil to cease oil exploration and production, (3)
ExxonMobil is getting out of Vietnam for larger issues related to global restructuring
and divestment, (4) PetroVietnam and ExxonMobil cannot agree on the price of gas,
and (5) any combination of possibilities two, three and four.
Given the high-level interest shown by the U.S. State Department in what it terms
Chinese bullying of Vietnam’s long-standing oil exploration it would be highly likely
that the U.S. Embassy in Hanoi is fully informed on these rumours and indeed has been
in contact with ExxonMobil’s offices in Hanoi. The same would hold true for contact
between ExxonMobil head offices in Houston, Texas and the State Department and
other government agencies in Washington. If reports of Chinese pressure on
ExxonMobil are true, it is also possible this issue could be raised at the impending next
round of talks between the U.S. and China on tariffs.
President Trump and his officials have pressed Vietnam to open their market to
American companies. ExxonMobil’s withdrawal from Vietnam would be a set back
from Trump’s perspective. It is conceivable that U.S. officials would advise ExxonMobil
not to act in haste. But the bottom line is that commercial considerations, including
risk, will shape whatever decision ExxonMobil makes.
Q2. You said that the U.S. Embassy in Hanoi and U.S. State Department have been
informed about the rumour. Please give me your opinion whether is there any
interference from State Department or other agencies of the US regarding Exxon
Mobil's decision to pull out of the Blue Whale Project? If the State Department
intervenes in Exxon Mobil's plan, what's is the purpose of this intervention?
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ANSWER: The job of the U.S. Embassy in Hanoi is three-fold – to monitor, to report
and to facilitate. The U.S. Embassy has diplomats who specialize on political affairs,
economic matters etc.
Economic specialists routinely monitor the Vietnamese Government’s economic
policies and their implementation to assess not only Vietnam’s future direction but to
assess the opportunities and challenges for U.S. business and investors. Economic
monitoring would involve regular face-to-face meeting with American businessmen
resident in Vietnam.
U.S. Embassy economic specialists would facilitate interaction between American
businessmen visiting Vietnam or resident in Vietnam and the Vietnamese government
Government and Vietnamese businesses.
U.S. Embassy officials would report back regularly to the Department of State in
Washington and respond to specific requests for information from the State
Department. This information would be used to inform U.S. decision-making.
Judging from my reading of the Wikileaks release of classified cables from the U.S.
Embassy in Hanoi several years ago, U.S. Embassy officials would have immediately
investigated the internet rumours that ExxonMobil might pull out of Vietnam due to
Chinese pressure. This would involve monitoring Vietnamese social media, discussions
with Vietnamese journalists and officials as well as contact with ExxonMobil Vietnam.
At the same time, the Vietnam Desk Officer and analysts in the Bureau of Intelligence
and Research in the State Department are likely to have requested information from
their colleagues at the U.S. Embassy in Hanoi.
In summary, the rumours that ExxonMobil has decided to pull out of the Blue Whale
Project are unconfirmed. The State Department would not interfere in this matter by
directing or asking ExxonMobil to take any particular action especially if it turns out
that commercial reasons are the main factor.
If reports of Chinese pressure on ExxonMobil turn out to be true, the State
Department and other agencies would have to determine whether this is part of a
larger Chinese strategy to drive out all foreign companies, including American
companies, from assisting Vietnam in the development of its hydrocarbon resources.
This would then become a policy matter for the Secretary of State and the U.S.
Government. Policy-makers would have to determine how to respond to China, and
to what extent the United States can offer support for Vietnam and ExxonMobil.
Q3. If the rumour is true, which enterprise would likely buy ExxonMobil's Blue Whale
Project in the South. China Sea? What factors would influence ExxonMobil sell their
stake to one enterprise not another?
ANSWER: ExxonMobil was recently dropped from the S&P 500 Index’s top 10
companies after being in the top ten for the past nine years. According to Energy News
Bulletin on 11 September “The most likely reason for ExxonMobil selling out is that
Blue Whale is that on a company scale it is a minor project in a non-core region at a
time when the supermajor is looking to complete US$15 billion worth of divestments
to streamline its portfolio to five key areas by 2025: the US Permian Basin, offshore
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Guyana, deep water Brazil, Mozambique and the two LNG project expansions it is
progressing in Papua New Guinea.”
ExxonMobil is known to have expressed interest in divesting itself of some of its assets
in Gulf of Mexico since October 2018. This month it was reported that Exxon Mobil
Corporation XOM is expected to sell some of its deep-water Gulf of Mexico assets to
Spanish energy company Repsol, S.A. REPYY for up to $1 billion. The deal requires
approval from ExxonMobil’s partners in the related projects who may have
preferential rights to acquire the assets.
If ExxonMobil has made the decision to divest itself of the Blue Whale Project the first
choice of buying out ExxonMobil's stake would go to its commercial partners. In this
case the major partner is PetroVietnam. Other foreign partners who have a
preferential rights in construction aspects of the project, such as Italy’s Saipem's
XSIGHT, likely would be given first choice of increasing their stake. ExxonMobil would
then sound other potential buyers and make its choice on commercia grounds.
Q4. Is there any connection between ExxonMobil’s decision and the trip to the United
States by Vietnam Communist Party Secretary General Nguyen Phu Trong in the near
future (maybe next month)?
ANSWER: Secretary General and President Nguyen Phu Trong was invited by
President Donald Trump to visit The White House when Trump was in Hanoi for his
second summit with North Korea's Kim Jong-un in February. Trump invited Trong to
discuss expanding their 2013 comprehensive partnership. In my view, the timing of
Trong's visit place – if it takes place in October –– is purely coincidental. Trump's
invitation came months before China deployed the Haiyang Dizhi 8 into waters near
Vanguard Bank. The timing is bad from China's point of view because since August the
United States has been highly critical of China for threatening Vietnam oil’s
exploration. Trump and Trong are likely to find common ground in criticizing China’s
actions but it is unlikely the U.S. would directly intervene.

Media Identification: Carl Thayer is emeritus professor at The University of

New South Wales, Canberra or Carl Thayer is emeritus professor at The University of
New South Wales at the Australian Defence Force Academy, Canberra.
Suggested citation: Carlyle A. Thayer, “ExxonMobil Facing Divestment Issues May Exit
Vietnam,” Thayer Consultancy Background Brief, September 12, 2019. All background
briefs are posted on Scribd.com (search for Thayer). To remove yourself from the
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Thayer Consultancy provides political analysis of current regional security issues and
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